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Mortgage Industry Update: Rates, News & More

***Smart Financial Weekly Mortgage Update November 6, 2009***

First time homebuyer tax credit update: Earlier today the President signed the bill extending and modifying the tax credit. The credit will be extended and cover purchase contracts signed by April 30, 2010 and closed by June 30, 2010. The first time buyer credit will remain the same with maximum of $8,000 for a couple but the income limit has been increased to $225,000. In addition, current home owners who have owned a home for 5 of the last 8 years can be eligible for a credit up to $6,500 for a couple and the income limit is $225,000. The maximum price on the home is $800,000.

 

Interest Rates

The Fed program to purchase MBS to keep rates low is at $977 Billion out of $1.25 Trillion and going forward they will average buying $12-13 Billion per week well below the past average weekly purchases of $20 to 25 Billion. We continue to experience very low, stable mortgage rates but the day of reckoning is approaching.

 

 

When	Rate
This Week	4.98
1 Month Ago	4.87
1 Year Ago	6.20
2 Years Ago	6.24

 

Note that actual market rates vary geographically and by lender, credit score and Loan to Value.

Source: Federal Reserve Statistical H.15.

 

Mortgage Industry Update

·         On December 12 Fannie Mae’s latest automated underwriting system (AUS) software upgrade Version 8.0 will set the maximum debt to income ratio at 45% with the possibility of going to 50% with compensating factors. Currently the maximum debt ratio with compensating factors is 55%.

·         Fannie Mae announced its Deed for Lease program as another way to slow down foreclosures. The program is for homeowners who cannot qualify for a loan modification (or it’s taking forever) and allows them to rent their home for fair rental value not to exceed 31% of family income. No details were available at this writing. Fannie Mae’s delinquency on it $750+ Billion portfolio was 4.45% in September.

·         The Senate approved a one year extension of the loan limits in “high cost” areas up to 125% of the local median home prices. This does not impact Maricopa County as the conventional limits of $417,000 and FHA limit of $346,250 will not change.

 

Good News

·         ISM manufacturing index rose to 55.7 forecast was 53.0.

·         Pending home sales were up 6.1% and have increased for eight consecutive months.

·         The Commerce Department said factory orders rose .9% in September the fifth increase in the last six months.

·         Wholesale inventories fell 1% in September the 13^th consecutive monthly decline.

·         Retail sales increased 1.8% in October just below forecast of 2% says Thomson Reuters.

 

Statistics of Interest/Concern

·         ISM services index slipped to 50.6 in October from 50.9 in September forecast was for 51.5.

·         Appraisal fraud was up 46% from a year ago according to Interthink.

·         At the end of the third quarter $26.64 Billion in CMBS loans were 60 days or more delinquent and the default rate rose to 4.52% from .8% one year ago says REIS Inc. The firm also said that delinquency may hit 6% by end of the year.

·         Productivity rose in the third quarter by 9.5% well above forecast of 6.5%.

·         Personal bankruptcies increased 9% in October and we are on target for 1.4 million this year according to the American Bankruptcy Institute. Also, there was a 7% increase in business bankruptcies.

 

Foreclosure Headlines

·         Credit Sights says accelerating shift from interest only to fully amortized loans (Arm re-sets) will increase payments and contribute to mortgage delinquency in the months ahead. For example, in the past year only 2% of Alt A interest only Arms re-set but in the next 15 months 20% are scheduled to re-set.

 

Job Market Headlines (correction: last week we reported initial weekly jobless claims were at 350,000 when in fact they were 530,000. We apologize for this error.)

·         October unemployment rate came in at 10.2% up from 9.8% in September. At least 16 million cannot find full time work according to the Labor Department.

·         Job losses in October were 190,000 less than revised September number of 219,000. October was the 22^nd consecutive month of job losses the longest streak in 70 years.

·         Initial weekly jobless claims were 512,000 below expectations of 522,000.

·         Four week moving average of weekly claims was 523,750.

·         Continuing claims came in at 5.749 million just below forecast of 5.75 million.

·         Planned job cuts announced by U.S. employers fell to 55,679 in October down 16% from September according to Challenger, Gray & Christmas Inc.

 

Commentary/Observations

The Labor Department said that the number of workers without jobs for more than six months is at the highest level in 50 years.

 

CIT Financial filed bankruptcy this week at a cost of $2.3 Billion in TARP money that will not get paid back to the government. Also, GMAC is looking for a third bailout from the government.

 

Thru October 134 active duty soldiers have committed suicide compared with the one year record of 140. If you know a veteran reach out to them and let them know we care!

 

Satellite pictures taken on April 26 and October 13 indicate that Iran has increased production at a Uranium mine. This discovery underscores the need for widespread inspection to determine if Iran is trying to build a nuclear reactor.

If you have any mortgage or related questions I can be reached at (602) 803-9660 or by e-mail at burt@gosfm.com.